Going Self Employed: How It Will Impact Your Finances

Going self-employed can deliver a lot of great benefits. You get to be your own boss, choose your own hours and do something you actually enjoy. However, before diving into the world of self-employment, there are a few things to take into account.

When you become self-employed, it can have a significant impact on your finances. Here, we’ll look at how your finances are affected when you take the self-employment route.

How will it affect your credit score?

When you become self-employed, it doesn’t show up on your credit file. However, that isn’t to say it doesn’t impact your credit score. 

When you take out finance for the business, it can impact your own personal credit score. This is especially true if you become a sole trader. So, if you miss a repayment for example, it’s going to show up on your personal credit file. 

Getting financial help

Perhaps one of the biggest ways self-employment can impact your finances, is that it can affect the financial help you’re offered. Whether you need financial help for the business or for your own personal needs, being self-employed can be a barrier. 

Most lenders want to see at least three years of bank statements for the company. So, if you’re just starting out on your self-employed journey, you’re not going to be able to provide this basic requirement. Self-employed people are typically considered riskier borrowers due to the fact that a set income isn’t guaranteed.  

However, there are lenders out there who specialise in self-employed borrowing. So, if you search hard enough you should be able to find the help you need. You can even find lenders specialised in car finance for the self-employed such as Go Car Credit. 

The effect on mortgages

Did you know being self-employed can impact your chances of getting a mortgage? Some lenders will flat out refuse to lend to the self-employed, while others will offer higher interest rates. It’s important to focus on ensuring you have a good credit score and you can provide three to five years’ worth of accounts to prove your income. It can also be more beneficial to go through a broker to ensure you’re matched against the best lender.

These are some of the main financial factors to consider when considering going self-employed. Understanding how it could impact you financially is essential before deciding if self-employment is right for you.